Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-59519 July 20, 1982ADELA FRANCISCO,petitioner,vs.HON. ALFREDO M. GORGONIO, as Presiding Judge of the Court of First Instance of Rizal, Branch XXXV, Caloocan City, Deputy Sheriff Danilo P. Norberto, and Spouses Ching Siao and Lim O. Chu,respondents.Napoleon M. Malimas for petitioner.Antonio P. Coronel for respondents.BARREDO,J.:Petition for certiorari seeking the setting aside of the orders of respondent court of August 15, 1980, November 7, 1980, March 2, 1981, October 27, 1981 and December 16, 1981, particularly insofar as said orders require petitioner to pay interest at the rates stated therein in addition to the amount of P150,000.00 which has already been paid to private respondents.The case below stemmed from a contract of lease entered into on July 5, 1977 between Zenaida F. Boiser "representing her parents, spouses Luis F. Francisco and Adela Blas Francisco" (p. 26, Record)1of a piece of land one hundred thirty-five square meters, more or less, situated at No. 691 (Old) Rizal Avenue Extension, Caloocan City, with the following pertinent provisions:1. That the amount of ONE HUNDRED FIFTY THOUSAND PESOS (Pl50,000.00), Philippine Currency, shall be deposited by the Lessee in favor of the Lessor upon signing of this agreement;2. That out of the deposit of P150,000.00, the amount of P30,000.00 equivalent to twenty per cent (20%) of said deposit shall represent the goodwill of the store space;3. That the monthly rental shall be THREE THOUSAND SEVEN HUNDRED FIFTY PESOS (P3,750.00), Philippine Currency, and the amount of P2,500.00 shall be deducted against the aforesaid deposit and the amount of P1,250.00 shall be in postdated monthly checks for 12 months. It is understood and agreed that the monthly rental aforesaid shall begin upon final occupancy of said store space by the Lessee;4. That the proposed building shall be constructed and to be finished by the Lessor within 6 months from execution of this agreement:5. That the terms of the lease contract shall be ten (10) years from execution hereof, to be renewed for a 5-year period upon agreement of both parties, subject however for a reasonable increase of monthly rental after five (5) years from execution hereof;6. That in case the parties hereof will not agree as to the conditions and terms to be set up in the final contract of lease, then the Lessor agrees to return and refund the amount of P150,000.00 as deposit in full with legal interest to the Lessee and this agreement shall be considered null and void and without force and effect, if however, it is the Lessee who will back out from this agreement, then the amount of P30,000.00 shall be forfeited.On May 30, 1978, private respondents filed a complaint, Civil Case No. C-6935, precisely the case below, against Zenaida F. Boiser, as attorney-in-fact of the spouses Luis F. Francisco and Adela Francisco, alleging that in spite of their having paid the P120,000.00 advanced rentals and P30,000.00 goodwill stipulated in the agreement, and the promise of said defendant to deliver to them the leased premises within six months from the signing of the contract, she failed to do so without any legal justification, and instead was about to turn over possession thereof to Ginza Telamart, and, therefore, prayed thus:WHEREFORE, in view of all the foregoing it is most respectfully prayed as a preliminary matter that a writ 6f preliminary prohibitory injunction be issued by this court pending the final termination of this case ordering defendant to desist from awarding the leased premises to another and that after due hearing judgment be rendered:1. Making preliminary prohibitory injunction final and permanent;2. That plaintiff be entitled to the described leased portion of the building and ordering defendant to deliver the same;3. Ordering defendant to pay an amount reasonably assessed by the Honorable Court for moral damages;4. Ordering the defendant to pay actual damage as may be proven, plus legal interest;5. And further ordering defendant to pay the sum of P15,000.00 as and for attorney's fees.Plaintiffs herein further pray for such other reliefs and remedies just and equitable in the premises. (Pp. 24-25, Record)After being summoned, on June 29, 1978, defendant Boiser (who was the only one served with summons) filed her answer alleging and praying:10. That the agreement to lease was subject to the following conditions:(a) the resolutory condition contained in paragraph 6 thereof quoted in paragraph 2 of this answer;(b) the specific area of the building to be constructed was still to be agreed upon and it was not provided in the agreement what specific area of the building was to be leased by plaintiff;11. That plaintiff and defendant could not agree on the specific area of the new building to be leased, the choice of which was made difficult by the fact that the frontage as required by the city government; consequently, defendant opted to consider the agreement null and void and of no force and effect; that defendant tendered payment to plaintiff before the complaint was filed of the sum of P150,000.00 with interest at the legal rate as provided in paragraph 6 of the agreement, which tender of payment was refused by the plaintiff;12. That defendant is ready, willing and able to refund or reimburse the amount of P150,000.00 with interest at the legal rate as provided in paragraph 6 of the agreement;And as counterclaim, defendant respectfully alleges:13. That defendant reiterates the foregoing allegations to form integral part of this counterclaim;14. That defendant is lawfully entitled to consider the agreement null and void and of no force and effect and to make a consignation of the amount of P150,000.00 with interest at the legal rate under paragraph 6 of the agreement and to be released from any further liability thereon;15. That due to the unfounded suit filed by plaintiff, defendant has been compelled to litigate to protect her interest and avail of the services of counsel at an agreed fee of P5,000.00.WHEREFORE, it is respectfully prayed:1. That the prayer for a writ of preliminary injunction contained in the complaint be denied and the temporary restraining order be set aside;2. After trial, that judgment be rendered dismissing the complaint for lack of merit;3. On the counterclaim, that the Agreement dated July 5, 1977 between plaintiff and defendant be declared null and void and of no force and effect pursuant to paragraph 6 thereof, that the consignation of the amount of P150,000.00 with interest at the legal rate from July 5, 1977 until its deposit in court be accepted by the court; and that defendant be declared released from any further liability or obligation under the said Agreement;4. Likewise on the counterclaim, that plaintiff be ordered to pay defendant attorney's fees in the amount of P5,000.00, such expenses of litigation as may be proven, and to pay the costs, if any.Defendant respectfully prays for such other relief as the court may deem just and proper in the premises. (Pp. 29-31, Record)Evidently, the courta quomust have issued the restraining order prayed for in private respondent's complaint, for on July 24, 1978, defendant Boiser filed a motion praying:1. That the restraining order contained in the order of June 26, 1978 be lifted and set aside; and2. That plaintiff be allowed to deposit with the clerk of court, or with such other depository as the court may determine, the sum of Pl50,000.00 subject to the disposition of the court in its judgment. (Page 33, Record.)Acting on the foregoing motion, on August 10, 1978 Judge Alberto Q. Ubay, who was then still the judge in charge of the case, issued the following order:O R D E RThe "Omnibus Motion" filed by defendant, thru counsel, on July 25, 1978, is hereby GRANTED, it appearing from the records of this case and from the testimony of plaintiff Ching Siao that when on June 26, 1978 the Court issued a restraining order requiting defendant "to desist and refrain from awarding the leased premises to Ginza Telamart", the premises in question had already been leased to the said Ginza Telamart and has been actually occupied by it, contrary to the allegation and contention of the herein plaintiffs. Hence, the continuance of said restraining order is no longer justified.As regards the consignment of the sum of P150,000.00, the Court believes that no valid reason has been advanced by plaintiffs why the same should not be accepted or granted, subject to the outcome of this case on the merits and subject to the orders of this Court.WHEREFORE, the restraining order issued by the Court dated June 26, 1978, is hereby lifted and set aside; and the defendant Zenaida F. Boiser is hereby authorized to deposit with the Clerk of Court the sum of P150,000.00 subject to the disposition of the Court, as may be provided in the decision to be rendered in this case.SO ORDERED. (Page, 35, Record.)However, on August 22, 1978, the following motion appears to have been filed by defendant:NOW COMES defendant, by undersigned counsel, and to the Court respectfully moves for a partial reconsideration of the Order of August 10, 1978 insofar as said Order states that:... the defendant Zenaida F. Boiser is hereby authorized to deposit with the Clerk of Court the sum of P150,000.00 subject to the disposition of the court, as may be provided in the decision to be rendered in this case.on the following grounds:1. That as early as July 18, 1978, Adela B. Francisco, one of defendant's principals (who is also defendant's mother) had deposited with the Associated Citizen's Bank, Sangandaan Branch, the amount of P150,000.00 intended to be refunded to plaintiffs, as provided in paragraph 6 of the Agreement of July 5, 1977 (Annex "A" of the Complaint);2. That the said deposit earns interest of l4% per annum;3. That the said Adela Blas Francisco, as signified by her conformity to this motion, is willing to keep the said deposit and make it subject to the disposition of this court, as may be provided in the decision to be rendered in this case:4. That no prejudice would be caused to plaintiffs under the foregoing arrangement; on the other hand, it will earn for the parties interest at 14% per annum until disposed of under the judgment of this court;5. That as evidence of the deposit alleged in paragraph 1 hereof, there is attached to this motion a xerox copy of a certificate of time deposit issued by the Associated Citizens Bank, Sangandaan Branch, as Annex "A" hereof.WHEREFORE, it is respectfully prayed that the portion of the Order dated August 10, 1978 quoted in the opening paragraph of this motion be amended to read as follows:... that the defendant Zenaida F. Boiser is hereby authorized to deposit in the name of Adela B. Francisco, one of the principals in entering into contract with plaintiffs, the sum of P150,000.00 with the Associated Citizens Bank, Sangandaan Branch, subject to the disposition of the court, as may be provided in the decision to be rendered in this case.Quezon City for Caloocan City, August 22, 1978.(SGD.) ANACLETO S. MAGNOAttorney for the Defendant113 Mendez, BaesaQuezon CityWITH MY CONFORMITY:ADELA B. FRANCISCO (Pp. 38-39, Record.)Consequently, Judge Ubay ordered on September 13, 1978 that:O R D E RActing on the "Motion for Reconsideration", dated August 22, 1978 and filed by counsel for defendants, the Court, after a careful consideration of the grounds stated therein, as well as the arguments advanced by counsel for plaintiff, is of the opinion that the said motion should be, as it is hereby, GRANTED.WHEREFORE, the Order of this Court dated August 10, 1978 is hereby amended to read as follows:that the defendant Zenaida F. Boiser is hereby authorized to deposit in the name of Adela S. Francisco, one of her principals, in entering into contract with the Associated Citizens Bank, Sangandaan Branch, subject to the disposition of the Court, as may be provided in the decision to be rendered in this case, amount shall be made without an order from the Court. (sic)SO ORDERED. (Page 41, Record.)Apparently, as a counter-move, respondents filed on June 10, 1980, a Motion to Withdraw Deposit, asking the court that:WHEREFORE, premises considered, it is respectfully so prayed that Lim O. Chu be snowed to withdraw the P150,000.00 previously deposited in bank upon order of this Honorable Court, plus legal rate of interest (14% per anum) from July 5, 1977, the date of the contract, Annex "A" of complaint. (Page 43, Record.)Acting on this motion, on August 15, 1980, the now respondent judge who had replaced Judge Ubay, after the latter retired, issued an order pertinently ordering that:Considering the foregoing antecedents and subsequent developments in this case and in the broad interest of justice and equity, this Court hereby grants said motion of the plaintiffs to withdraw from the Associated Citizens Bank, Caloocan City Branch, the amount of P150,000.00 plus the legal interests accruing thereon deposited in the name of the defendant Adela B. Francisco by way of refund to plaintiffs spouses Ching Siao and Lim O. Chu and hereby orders the said bank and defendant Zenaida Boiser and/or Adela B. Francisco in whose name said amount had been deposited to comply with this Order, directing Zenaida Boiser and/or Adela Francisco to withdraw from said bank the amount of P150,000.00, together with all the interests due thereon, and further to turn over said amount to the plaintiffs spouses within five (5) days from receipt of this Order.Meanwhile and brushing aside legal technicalities raised by the parties, this Court will hold in abeyance resolution on other matters raised in the pleadings of the parties (Motion to Withdraw Deposit and Opposition to Withdrawal of Rentals) until such further steps that may be henceforth be taken by the parties-litigants in this case in the prosecution of their respective side of this case. (Pp. 45-46, Record.)This order was followed by another dated November 7, 1980, portions of which read:The delivery of the principal amount of P150,000.00 to the plaintiffs now being afait accompliwhat remains now to be resolved by this Court is the amount of the interest to be paid the plaintiffs. The defendants maintain that it should be the legal rate of six (6%) percent per annum while the plaintiffs claim their legal rate of interest should be twelve percent (12 %) per annum.Before resolving this issue, this Court finds it illuminating that the subject amount of P150,000.00 as admitted by the Associated Citizens Bank through their counsel, Atty. Teresita L. Nuguid in her Manifestation filed with this Court on September 3, 1980, was deposited by defendant Adela B. Francisco thru her attorney-in-fact, Zenaida F. Boiser in the form of time deposit (Account No. 7270, ACB). Hence, this Court can take judicial notice of the fact that as time deposit said amount of P150,000.00 earned aggregate interest far above the legal rates of 12% and 14% per annum allowed by law. Furthermore, as can be seen from Annex "A" of said Manifestation of the Associated Citizens Bank, defendant Adela B. Francisco made an assignment of said time deposit in favor of Engr. Laureano R. Arcadio and no doubt the said ban profited from the interest by reason of the time deposit far and above said legal rates.Said interest derived by the defendants by virtue of said time deposit is of no moment in this case and what is controlling as heretofore stated is the agreement not contrary to law, morals and public policy between the parties which in this case is and should be the legal rate of interest which is twelve percent (12%) per annum computed from the date of the aforesaid Agreement executed on July 5, 1977 and to deny the plaintiffs that the rate of interest due them (12%) would amount to allowing a party to enrich himself at the expense of the other. It cannot also be said that defendants- depositor suffered losses by reason of making such time deposit because the difference between the legal rates of interest and the aggregate interests in time deposits is substantial.WHEREFORE, premises considered, the defendants Adela B. Francisco and/or Zenaida F. Boiser, is hereby ordered:1. to pay the plaintiffs the legal rate of interest of twelve percent (12%) per annum on the deposit of P150,000.00 computed from July 5, 1977 (date when Agreement was executed) up to September 13, 1978 when the money was deposited with the Associated Citizens Bank on Time Deposit pursuant to the Order of then Presiding Judge, the Hon. Alberto Q. Ubay; and2. to pay the plaintiffs the legal rate of interest of twelve percent (12%) per annum on the deposit of P150,000.00 from September 13, 1978 (date when money was deposited with the Bank) up to August 29, 1980, when the said deposited money was refunded to the plaintiffs. (Pp. 48-50, Record.)And on March 2, 1981, again respondent judge ordered:Before this Court is plaintiffs' Motion for Execution of the Order dated November 7, 1980, to which the defendants file their opposition with Motion for Reconsideration on January 29, 1981, and as a rejoinder the plaintiffs filed their Opposition to Defendants' Motion for Reconsideration on February 13, 1981.Brushing aside all legal technicalities and niceties of the law raised by the respective counsels in their respective pleadings, this Court has to resolve the issue as to the proper rate of legal interest due to the plaintiffs and to reckon the period from which said interest should run in consonance with the antecedent facts and circumstances of this case in the broad interest of justice and equity.This Court observes that the parties in the prosecution of their respective claims are motivated with a desire to get the maximum of what is due him on the one hand and the desire of the other to give the least or minimum of what he is bound to pay. At first blush considering that the bone of contention revolves in the determination of the proper rate of interest and the period to be covered, the issue seems inconsequential but considering the amount involved which is to the tune of P150,000.00 the respective positions taken by the parties in the instant case is quite understandable. Hence, this Court will resolve the issue on the basis of the time-honored legal dictum that "no one shall enrich himself at the expense of another" in conjunction with the facts and circumstances of this case in the broad interest of justice and equity.Premises considered, this Court hereby reconsiders its Order dated November 7, 1980 and hereby orders the defendants Adela B. Francisco and/or Zenaida F. Boiser:1. To pay the plaintiffs the legal rate of interest of nine (9%) percent per annum on the deposit of P 150,000.00 computed from July 5, 1977 (date of execution of Agreement) up to September 13, 1978 when the money was deposited with the Associated Citizens Bank on Time Deposit pursuant to the Order of then Presiding Judge of this Court, Hon. Alberto Q. Ubay; and2. To pay the plaintiffs the legal rate of interest of twelve (12%) percent per annum on the deposit of P150,000.00 from September 13, 1978 (date when money was deposited with the Bank) up to August 29, 1980 (date of refund of the money to the plaintiffs). (Pp. 51-53, Record)On July 31, 1981, petitioner filed a motion to quash the writ of execution issued pursuant to the above order, contending that she was not properly made a party to the case, since the defendant was her daughter Zenaida F. Boiser. On October 27, 1981, respondent judge denied said motion holding that said movant had by certain actuations related to the case vitually submitted her person to its jurisdiction although she was not properly made a party thereto. On October 16, 1981, respondent denied petitioner's motion for reconsideration, hence the instant petition before Us.From a reading of the pleadings of both parties and looking at the case as a whole, We feel that somehow both counsel have centered, even with vehemence, on two points, which could be off-tangent, namely: (1) petitioner insists that the lower court had not acquired jurisdiction over her person and (2) respondents, for their part, maintain that they should be paid interest.As far as petitioner is concerned, she evidently overlooks the fact that the record reveals that she gave her express conformity to the motion of defendant Boiser dated August 22, 1978, We have quoted earlier. Although technically, her contention is correct that she is not a party to the case below, she voluntarily formally manifested to the court "her conformity to this motion (of defendant Boiser) (and) is willing to keep the said deposit (made by her on July 18, 1978 in her own name in the Associated Citizens Bank, Sangandaan Branch) and make it subject to the disposition of this court, as may be provided in the decision to be rendered in this case." Under this circumstance, her being a party or not in the case has become immaterial. The fact is that she bound herself to an obligation with the court and the respondents, albeit, in this connection, it is very clear that her obligation is premised on the "decision to be rendered in this case" exclusively. And that decision has not materialized, hence she has nothing to answer for.On the other hand, the insistence of respondents to recover interests on the P150,000.00, can hardly have any legal basis, as things developed when they first demanded from defendant Boiser compliance with the agreement. According to the answer filed by said defendant, it is alleged therein, and this allegation has not been denied by respondents, "that defendant tendered payment to the plaintiff before the complaint was filed (on May 30, 1978) of the sum of P150,000.00 with interest at the legal rate as provided in paragraph 6 of the agreement, which tender of payment was refused by the plaintiffs." On this score, We hold to be well taken the following posture of defendant Boiser, which, of course, benefits equally her mother:DAMAGES CANNOT BE AWARDED WITHOUT PRIOR DETERMINATION OF THE MERITS OF THE CASE. IN ANY EVENT, DEFENDANT BOISER HAVING TENDERED THE AMOUNT, DAMAGES CANNOT BE ADJUDGED AGAINST HERThe award for interests in an action for the recovery of a sum of money partakes of a nature of an award for damages. Thus, Article 2209 of the Civil Code provides:Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs indelay, the indemnityfor damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per annum.Clearly, the indemnity for interest on a monetary obligation attaches only when the obligor incurs delay, that is, when he is in default, it being a fundamental principle of law that:Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudiciallydemandsfrom them the fulfillment of their obligation. (Art. 1169, Civil Code.)In the case at bar, it is not disputed that no demands, judicial or extrajudicial, were made by private respondents on defendant Boiser for the return of the amount of P150,000.00. There could not have been any because of the nature of the action filed by private respondents, which is for specific performance. Hence, there is no delay of the latter's obligation, assuming that she be eventually required in the decision of the Court to return the same. Upon the contrary, it was private respondents who were inmora accipiendefrom the time defendant Boiser tendered and consigned the amount in Court.Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept, the debtor shall be released from the responsibility by the consignation of the thing or sum done.(Art. 1256, Civil Code).Tender and consignation having been properly made by defendant Boiser, she should therefore be released from paying the interests on the sum so deposited.InGregorio Araneta, Inc. vs. Tuazon de Paterno, et al., 91 Phil. 786, it was held that tender of payment alone suspends the running of the interest on the obligation. ThusThe matter of the suspension of the running of interest on the loan is governed by principles which regard reality rather than technicality, substance rather than form. Good faith of the offeror or ability to make good the offer should in simple justice excuse the debtor from paying interest after the offer was rejected. A debtor cannot be consider delinquent who offered checks backed by sufficient deposit or ready to pay cash it the creditor chose that means of payment. Technical defects of the offer cannot be adduced to destroy its effects when the objection to accept the payment was based on entirely different grounds. Thus,although the defective consignation made by the debtor did not discharge the mortgage debt, the running of interest on the loan is suspended by the offer and tender of payment. (Pp. 17-18, Record.)IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of petitioner absolving her from the payment of the interests claimed by respondents beyond the date when defendant Boiser made her tender, not-only because the decision on the merits contemplated in her obligation aforementioned and on which her conformity to defendant Boiser's motion of August 22, 1978 was based has not materialized because respondents opted to get their money back instead of insisting on being given possession of the premises; which was the original nature of their action,2but also because, in consequence of Boiser's tender to return the P150,000.00 prior to the filing of the respondents' complaint, and the refusal of the latter to accept the same, no obligation to pay any interest could attach after the tender was made. In other words, defendant Boiser and/or petitioner should pay 12% interest only from January 5, 1978, that is, six months after the signing of the contract3up to, at the latest, May 30, 1978, when the respondents' complaint was filed, roughly a little less than four months.No costs.Concepcion, Jr., Guerrero, Abad Santos, De Castro and Escolin, JJ., concur.Separate OpinionsAQUINO,J.,dissenting:I dissent. Lim O. Chu, as lessee, deposited on July 5, 1977 with Adela Blas Francisco, the lessor, through her daughter, Zenaida Francisco Boiser, the sum of P150,000 to cover the rentals and goodwill for the lease to Lim O. Chu of Adela B. Francisco's 135- square-meter lot located at 691 Rizal Avenue Extension, Caloocan City.It was stipulated that if the lease is not consummated Adela B. Francisc would return to Lim O. Chu the P150,000 "in full with legal interest". The lease was not consummated. Adela did not deliver possession of the lot to Lim O. Chu.On June 1, 1978 Lim O. Chu sued Zenaida F. Boiser, as attorney- in-fact of her parents, for specific performance and damages. In her answer dated June 29, 1978 Zenaida alleged that before Lim O. Chu filed his complaint she tendered to him the sum of P150,000 with legal rate of interest but he refused to accept the amount.Zenaida prayed that the lease be declared void and that the consignation of the sum of P150,000 with legal rate of interest from July 5, 1977 "until its deposit in court be accepted by the court" (p. 31, Rollo).Thus, at the beginning, Lim O. Chu was insisting on specific performance while Zenaida F. Boiser wanted to rescind the lease and return the P150,000 to Lim O. Chuwith legal rate of interest as agreed upon between them in paragraph 6 of the lease contract.It should be recalled that the said amount was paid to Zenaida's mother, Adela Blas Francisco, onJuly 5, 1977but it was only onJuly 18,1978or after she was sued by Lim O. Chu that the said amount was deposited in the Sangandaan Branch of the Associated Citizens Bank with interest at14% per annum. On September 13, 1978, the said amount was placed on time deposit.The trial court in its order of September 13, 1978 granted the motion of Zenaida F. Boiser and her mother Adela B. Francisco that the said amount remain on time deposit in the bank (instead of being consigned in court) subject to the outcome of the case.In the meantime, Lim O. Chu had changed his mind about specific performance and became interested in getting hold of the P150,000. Abouttwenty monthsafter the trial court had authorized the deposit of that amount in the bank, or onJune 10, 1980, Lim O. Chu filed a motion for the withdrawal of that amount from the bank plus 14% interest a year from July 5, 1977.The trial court in its order of August 15, 1980 granted the motion and allowed Lim O. Chu to withdraw the P150,000 from the bank "plus legal interests accruing thereon" and directed Zenaida and her mother within five days from notice "to withdraw from said bank the amount of P150,000, together withall the interests due thereon" and "to turn over the said amount to"Lim O. Chu.That sum of P150,000 was paid to Lim O. Chu by Zenaida onAugust 29, 1980but without the accrued interests. She did not comply fully with the trial court's order of August 15, 1980. Thus, a controversy arose as to the amount of interests that should be paid to Lim O. Chu.In its order of November 7, 1980, the trial court ordered Adela B. Francisco and Zenaida to pay Lim O. Chu 12% interest a year on the said amount from July 5, 1977 up to August 29, 1980 when it was returned to Lim O. Chu. Zenaida F. Boiser and her mother filed a motion for the reconsideration of that order.The trial court in its order of March 2, 1981 modified its prior order. It held that Adela and Zenaida should pay Lim O. Chu 9% interest a year on the P150,000 from July 5, 1977 up to September 13, 1978, when the said amount was placed on time deposit, and 12% interest a year from September 13, 1978 up to August 29, 1980 when the amount was returned to Lim O. Chu.That order of March 2,1981 became final and executory.I vote for the enforcement of that order. It is dictated by elementary justice and is in consonance with the agreement of the parties. Mrs. Boiser and her mother had an along manifested a desire to pay the legal rate of interest on the amount of P150,000 which, having been deposited in the bank, actually earned interest.Separate OpinionsAQUINO,J.,dissenting:I dissent. Lim O. Chu, as lessee, deposited on July 5, 1977 with Adela Blas Francisco, the lessor, through her daughter, Zenaida Francisco Boiser, the sum of P150,000 to cover the rentals and goodwill for the lease to Lim O. Chu of Adela B. Francisco's 135- square-meter lot located at 691 Rizal Avenue Extension, Caloocan City.It was stipulated that if the lease is not consummated Adela B. Francisco would return to Lim O. Chu the P150,000 "in full with legal interest". The lease was not consummated. Adela did not deliver possession of the lot to Lim O. Chu.On June 1, 1978 Lim O. Chu sued Zenaida F. Boiser, as attorney- in-fact of her parents, for specific performance and damages. In her answer dated June 29, 1978 Zenaida alleged that before Lim O. Chu filed his complaint she tendered to him the sum of P150,000 with legal rate of interest but he refused to accept the amount.Zenaida prayed that the lease be declared void and that the consignation of the sum of P150,000 with legal rate of interest from July 5, 1977 "until its deposit in court be accepted by the court" (p. 31, Rollo).Thus, at the beginning, Lim O. Chu was insisting on specific performance while Zenaida F. Boiser wanted to rescind the lease and return the P150,000 to Lim O. Chuwith legal rate of interest as agreed upon between them in paragraph 6 of the lease contract.It should be recalled that the said amount was paid to Zenaida's mother, Adela Blas Francisco, onJuly 5, 1977but it was only onJuly 18,1978or after she was sued by Lim O. Chu that the said amount was deposited in the Sangandaan Branch of the Associated Citizens Bank with interest at14% per annum. On September 13, 1978, the said amount was placed on time deposit.The trial court in its order of September 13, 1978 granted the motion of Zenaida F. Boiser and her mother Adela B. Francisco that the said amount remain on time deposit in the bank (instead of being consigned in court) subject to the outcome of the case.In the meantime, Lim O. Chu had changed his mind about specific performance and became interested in getting hold of the P150,000. Abouttwenty monthsafter the trial court had authorized the deposit of that amount in the bank, or onJune 10, 1980, Lim O. Chu filed a motion for the withdrawal of that amount from the bank plus 14% interest a year from July 5, 1977.The trial court in its order of August 15, 1980 granted the motion and allowed Lim O. Chu to withdraw the P150,000 from the bank "plus legal interests accruing thereon" and directed Zenaida and her mother within five days from notice "to withdraw from said bank the amount of P150,000, together withall the interests due thereon" and "to turn over the said amount to"Lim O. Chu.That sum of P150,000 was paid to Lim O. Chu by Zenaida onAugust 29, 1980but without the accrued interests. She did not comply fully with the trial court's order of August 15, 1980. Thus, a controversy arose as to the amount of interests that should be paid to Lim O. Chu.In its order of November 7, 1980, the trial court ordered Adela B. Francisco and Zenaida to pay Lim O. Chu 12% interest a year on the said amount from July 5, 1977 up to August 29, 1980 when it was returned to Lim O. Chu. Zenaida F. Boiser and her mother filed a motion for the reconsideration of that order.The trial court in its order of March 2, 1981 modified its prior order. It held that Adela and Zenaida should pay Lim O. Chu 9% interest a year on the P150,000 from July 5, 1977 up to September 13, 1978, when the said amount was placed on time deposit, and 12% interest a year from September 13, 1978 up to August 29, 1980 when the amount was returned to Lim O. Chu.That order of March 2,1981 became final and executory.I vote for the enforcement of that order. It is dictated by elementary justice and is in consonance with the agreement of the parties. Mrs. Boiser and her mother had an along manifested a desire to pay the legal rate of interest on the amount of P150,000 which, having been deposited in the bank, actually earned interest.Footnotes

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 101163January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner, vs.COURT OF APPEALS and NORA B. MOULIC, respondents.

Escober, Alon & Associates for petitioner.

Martin D. Pantaleon for private respondents.

BELLOSILLO, J.:

The liability to a holder in due course of the drawer of checks issued to another merely as security, and the right of a real estate mortgagee after extrajudicial foreclosure to recover the balance of the obligation, are the issues in this Petition for Review of the Decision of respondent Court of Appeals.

Private respondent Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on commission, two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the other, 30 September 1979. Thereafter, the payee negotiated the checks to petitioner State Investment House. Inc. (STATE).

MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee bank.

Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in cash instead, although MOULIC avers that no such notice was given her.

On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and expenses of litigation.

In her Answer, MOULIC contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consent. She also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed full responsibility for the checks.

On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party Complaint, and ordered STATE to pay MOULIC P3,000.00 for attorney's fees.

STATE elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial court on the ground that the Notice of Dishonor to MOULIC was made beyond the period prescribed by the Negotiable Instruments Law and that even if STATE did serve such notice on MOULIC within the reglementary period it would be of no consequence as the checks should never have been presented for payment. The sale of the jewelry was never effected; the checks, therefore, ceased to serve their purpose as security for the jewelry.

We are not persuaded.

The negotiability of the checks is not in dispute. Indubitably, they were negotiable. After all, at the pre-trial, the parties agreed to limit the issue to whether or not STATE was a holder of the checks in due course. 1

In this regard, Sec. 52 of the Negotiable Instruments Law provides

Sec. 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it was previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. 2 Consequently, the burden of proving that STATE is not a holder in due course lies in the person who disputes the presumption. In this regard, MOULIC failed.

The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular: (b) petitioner bought these checks from the payee, Corazon Victoriano, before their due dates; 3 (c) petitioner took these checks in good faith and for value, albeit at a discounted price; and, (d) petitioner was never informed nor made aware that these checks were merely issued to payee as security and not for value.

Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves; STATE may, therefore, enforce full payment of the checks. 4

MOULIC cannot set up against STATE the defense that there was failure or absence of consideration. MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they were issued and therefore is not a holder in due course.

That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course. For the only grounds are those outlined in Sec. 119 of the Negotiable Instruments Law:

Sec. 119.Instrument; how discharged. A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the principal debtor; (b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right.

Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up, 5 burning it, 6 or writing the word "cancelled" on the instrument. The act of destroying the instrument must also be made by the holder of the instrument intentionally. Since MOULIC failed to get back possession of the post-dated checks, the intentional cancellation of the said checks is altogether impossible.

On the other hand, the acts which will discharge a simple contract for the payment of money under paragraph (d) are determined by other existing legislations since Sec. 119 does not specify what these acts are, e.g., Art. 1231 of the Civil Code 7 which enumerates the modes of extinguishing obligations. Again, none of the modes outlined therein is applicable in the instant case as Sec. 119 contemplates of a situation where the holder of the instrument is the creditor while its drawer is the debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the jewelry was returned.

Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her checks to a holder in due course.

Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. The need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law:

Sec. 114. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in the following cases: (a) Where the drawer and the drawee are the same person; (b) When the drawee is a fictitious person or a person not having capacity to contract; (c) When the drawer is the person to whom the instrument is presented for payment: (d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument; (e) Where the drawer had countermanded payment.

Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks when she returned the jewelry. She simply withdrew her funds from her drawee bank and transferred them to another to protect herself. After withdrawing her funds, she could not have expected her checks to be honored. In other words, she was responsible for the dishonor of her checks, hence, there was no need to serve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer or indorser of the instrument, either verbally or by writing, the fact that a specified instrument, upon proper proceedings taken, has not been accepted or has not been paid, and that the party notified is expected to pay it. 8

In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case. 9

The drawing and negotiation of a check have certain effects aside from the transfer of title or the incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated paper makes a contract with the parties on the face of the instrument. There is an implied representation that funds or credit are available for the payment of the instrument in the bank upon which it is drawn. 10 Consequently, the withdrawal of the money from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due course. In the instant case, such withdrawal renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks.

Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the drawee bank to meet her obligation on the checks, 11 so that Notice of Dishonor would be futile.

The Court of Appeals also held that allowing recovery on the checks would constitute unjust enrichment on the part of STATE Investment House, Inc. This is error.

The record shows that Mr. Romelito Caoili, an Account Assistant, testified that the obligation of Corazon Victoriano and her husband at the time their property mortgaged to STATE was extrajudicially foreclosed amounted to P1.9 million; the bid price at public auction was only P1 million. 12 Thus, the value of the property foreclosed was not even enough to pay the debt in full.

Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the debtor. 13 The step thus taken by the mortgagee-bank in resorting to an extra-judicial foreclosure was merely to find a proceeding for the sale of the property and its action cannot be taken to mean a waiver of its right to demand payment for the whole debt. 14 For, while Act 3135, as amended, does not discuss the mortgagee's right to recover such deficiency, it does not contain any provision either, expressly or impliedly, prohibiting recovery. In this jurisdiction, when the legislature intends to foreclose the right of a creditor to sue for any deficiency resulting from foreclosure of a security given to guarantee an obligation, it so expressly provides. For instance, with respect to pledges, Art. 2115 of the Civil Code 15 does not allow the creditor to recover the deficiency from the sale of the thing pledged. Likewise, in the case of a chattel mortgage, or a thing sold on installment basis, in the event of foreclosure, the vendor "shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary will be void". 16

It is clear then that in the absence of a similar provision in Act No. 3135, as amended, it cannot be concluded that the creditor loses his right recognized by the Rules of Court to take action for the recovery of any unpaid balance on the principal obligation simply because he has chosen to extrajudicially foreclose the real estate mortgage pursuant to a Special Power of Attorney given him by the mortgagor in the contract of mortgage. 17

The filing of the Complaint and the Third-Party Complaint to enforce the checks against MOULIC and the VICTORIANO spouses, respectively, is just another means of recovering the unpaid balance of the debt of the VICTORIANOs.

In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in due course, STATE, without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants who had already been declared as in default.

WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED and a new one entered declaring private respondent NORA B. MOULIC liable to petitioner STATE INVESTMENT HOUSE, INC., for the value of EBC Checks Nos. 30089658 and 30089660 in the total amount of P100,000.00, P3,000.00 as attorney's fees, and the costs of suit, without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants.

Costs against private respondent.

SO ORDERED.

Cruz and Grio-Aquino, JJ., concur.

Padilla, J., took no part.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 97412July 12, 1994

EASTERN SHIPPING LINES, INC., petitioner, vs.HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.

Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.

Zapa Law Office for private respondent.

VITUG, J.:

The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).

The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced:

This is an action against defendants shipping company, arrastre operator and broker-forwarder for damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value of such losses/damages.

On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38.

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad Order Survey." Exh. D).

On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E).

Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants (per "Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O). (pp. 85-86, Rollo.)

There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said:

Defendants filed their respective answers, traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport averred that although subject shipment was discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it.

From the evidence the court found the following:

The issues are:

1.Whether or not the shipment sustained losses/damages;

2.Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody, if determinable);

3.Whether or not defendant(s) should be held liable for the losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).

As to the first issue, there can be no doubt that the shipment sustained losses/damages. The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. B and C). But when on December 12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it excepted to one drum in bad order.

Correspondingly, as to the second issue, it follows that the losses/damages were sustained while in the respective and/or successive custody and possession of defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage). This becomes evident when the Marine Cargo Survey Report (Exh. G), with its "Additional Survey Notes", are considered. In the latter notes, it is stated that when the shipment was "landed on vessel" to dock of Pier # 15, South Harbor, Manila on December 12, 1981, it was observed that "one (1) fiber drum (was) in damaged condition, covered by the vessel's Agent's Bad Order Tally Sheet No. 86427." The report further states that when defendant Allied Brokerage withdrew the shipment from defendant arrastre operator's custody on January 7, 1982, one drum was found opened without seal, cello bag partly torn but contents intact. Net unrecovered spillages was 15 kgs. The report went on to state that when the drums reached the consignee, one drum was found with adulterated/faked contents. It is obvious, therefore, that these losses/damages occurred before the shipment reached the consignee while under the successive custodies of defendants. Under Art. 1737 of the New Civil Code, the common carrier's duty to observe extraordinary diligence in the vigilance of goods remains in full force and effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the place of destination, until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that on December 12, 1981 one drum was found "open".

and thus held:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

A.Ordering defendants to pay plaintiff, jointly and severally:

1.The amount of P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract);

2.P3,000.00 as attorney's fees, and

3.Costs.

B.Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation.

SO ORDERED. (p. 207, Record).

Dissatisfied, defendant's recourse to US.

The appeal is devoid of merit.

After a careful scrutiny of the evidence on record. We find that the conclusion drawn therefrom is correct. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants, and therefore they are liable to the appellee, as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.)

The Court of Appeals thus affirmed in toto the judgment of the court a quo.

In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion on the part of the appellate court when

I.IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;

II.IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED.

The petition is, in part, granted.

In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to.

The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case.

The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable in solidum, thus:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee.

We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.

It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark.

Let us first see a chronological recitation of the major rulings of this Court:

The early case of Malayan Insurance Co., Inc., vs. Manila Port Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:

Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the starting point.

But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." And as was held by this Court in Rivera vs. Perez, 4 L-6998, February 29, 1956, if the suit were for damages, "unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)

The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages for Injury to Person and Loss of Property." After trial, the lower court decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows:

Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons:

xxx xxx xxx

(g)Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. (Emphasis supplied.)

On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the appellate court's decision became final, the case was remanded to the lower court for execution, and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the petitioners contended that Central Bank Circular No. 416, providing thus

By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve (12%) percent per annum. This Circular shall take effect immediately. (Emphasis found in the text)

should have, instead, been applied. This Court 6 ruled:

The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank.

xxx xxx xxx

Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum.

The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid.

In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of damages arising from the collapse of a building, ordered, inter alia, the "defendant United Construction Co., Inc. (one of the petitioners) . . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the modification of the amount granted by the lower court, the Court of Appeals sustained the trial court's decision. When taken to this Court for review, the case, on 03 October 1986, was decided, thus:

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, we deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis supplied)

A motion for reconsideration was filed by United Construction, contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in contravention of law." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained:

There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or credit; and (3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the instant case, there is neither a loan or a forbearance, but then no interest is actually imposed provided the sums referred to in the judgment are paid upon the finality of the judgment. It is delay in the payment of such final judgment, that will cause the imposition of the interest.

It will be noted that in the cases already adverted to, the rate of interest is imposed on the total sum, from the filing of the complaint until paid; in other words, as part of the judgment for damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.)

The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private respondent to recover damages, held the award, however, for moral damages by the trial court, later sustained by the IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral damages, with six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied)

Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose from a breach of employment contract. For having been illegally dismissed, the petitioner was awarded by the trial court moral and exemplary damages without, however, providing any legal interest thereon. When the decision was appealed to the Court of Appeals, the latter held:

WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental dated October 31, 1972 is affirmed in all respects, with the modification that defendants-appellants, except defendant-appellant Merton Munn, are ordered to pay, jointly and severally, the amounts stated in the dispositive portion of the decision, including the sum of P1,400.00 in concept of compensatory damages, with interest at the legal rate from the date of the filing of the complaint until fully paid (Emphasis supplied.)

The petition for review to this Court was denied. The records were thereupon transmitted to the trial court, and an entry of judgment was made. The writ of execution issued by the trial court directed that only compensatory damages should earn interest at 6% per annum from the date of the filing of the complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition for certiorari assailed the said order. This Court said:

. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate" from the time of the filing of the complaint. . . Said circular [Central Bank Circular No. 416] does not apply to actions based on a breach of employment contract like the case at bar. (Emphasis supplied)

The Court reiterated that the 6% interest per annum on the damages should be computed from the time the complaint was filed until the amount is fully paid.

Quite recently, the Court had another occasion to rule on the matter. National Power Corporation vs. Angas, 14 decided on 08 May 1992, involved the expropriation of certain parcels of land. After conducting a hearing on the complaints for eminent domain, the trial court ordered the petitioner to pay the private respondents certain sums of money as just compensation for their lands so expropriated "with legal interest thereon . . . until fully paid." Again, in applying the 6% legal interest per annum under the Civil Code, the Court 15 declared:

. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits but expropriation of certain parcels of land for a public purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof. Therefore, since the kind of interest involved in the joint judgment of the lower court sought to be enforced in this case is interest by way of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply.

Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v. Ruiz (1989) and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance Company v. Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International v. Intermediate Appellate Court (1988).

In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid.

The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per annum, 17 depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid, the "second group" varied on the commencement of the running of the legal interest.

Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo, explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should be from the date of the decision.'" American Express International v. IAC, introduced a different time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the) decision until paid." The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid.

The ostensible discord is not difficult to explain. The factual circumstances may have called for different applications, guided by the rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to suggest the following rules of thumb for future guidance.

I.When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20

II.With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1.When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code.

2.When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court 24 at the rate of 6% per annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. 26 Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3.When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and Kapunan, JJ., concur.

Mendoza, J., took no part.

DigestEastern Shipping vs CAGR No. 97412, 12 July 1994234 SCRA 78

FACTS Two fiber drums were shipped owned by Eastern Shipping from Japan. The shipment as insured with a marine policy. Upon arrival in Manila unto the custody of metro Port Service, which excepted to one drum, said to be in bad order and which damage was unknown the Mercantile Insurance Company. Allied Brokerage Corporation received the shipment from Metro, one drum opened and without seal. Allied delivered the shipment to the consignees warehouse. The latter excepted to one drum which contained spillages while the rest of the contents was adulterated/fake. As consequence of the loss, the insurance company paid the consignee, so that it became subrogated to all the rights of action of consignee against the defendants Eastern Shipping, Metro Port and Allied Brokerage. The insurance company filed before the trial court. The trial court ruled in favor of plaintiff an ordered defendants to pay the former with present legal interest of 12% per annum from the date of the filing of the complaint. On appeal by defendants, the appellate court denied the same and affirmed in toto the decision of the trial court.

ISSUE(1) Whether the applicable rate of legal interest is 12% or 6%.

(2) Whether the payment of legal interest on the award for loss or damage is to be computed from the time the complaint is filed from the date the decision appealed from is rendered.

HELD(1) The Court held that the legal interest is 6% computed from the decision of the court a quo. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damaes awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.

When the judgment of the court awarding a sum of money becomes final and executor, the rate of legal interest shall be 12% per annum from such finality until satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of money.

The interest due shall be 12% PA to be computed fro default, J or EJD.

(2) From the date the judgment is made. Where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or EJ but when such certainty cannot be so reasonably established at the time the demand is made, the interest shll begin to run only from the date of judgment of the court is made.

(3) The Court held that it should be computed from the decision rendered by the court a quo.

SECOND DIVISION

[G.R. No. 84884 : December 3, 1990.]

EULALIO M. RUIZ and ILUMINADA RUIZ, Petitioners, vs. HON. DOROTEO N. CANEBA, THE CITY SHERIFF OF MANILA AND/OR HIS DEPUTIES, ZENAIDA SANGALANG and ADOLFO CRUZ, Respondents.

D E C I S I O N

PARAS, J.:

This is a petition for Certiorari and prohibition with preliminary injunction and/or restraining order of the Order of the respondent judge 1 dated July 27, 1988 in Civil Case No. 84-24032 entitled "Eulalio M. Ruiz and Iluminada M. Ruiz vs. Zenaida S. Sangalang and Adolfo Cruz" amending the May 15, 1986 decision of Judge Antonio M. Martinez (now Justice of the Court of Appeals). The facts of the case are as follows:

Private respondents Zenaida Sangalang and Adolfo Cruz are common-law spouses and owners in common of a 2-storey house and lots described in Transfer Certificate of Title (TCT) No. 56053 of the Registry of Deeds of Caloocan City but registered only in the name of Zenaida Sangalang.

Petitioners, the spouses Eulalio M. Ruiz and Iluminada M. Ruiz are the lessees of Door No. 1 of the aforesaid two storey house divided into 2 doors, for a monthly rental of P650.00.:- nad

Sometime on November 19, 1982, Eulalio Ruiz and Zenaida Sangalang executed an agreement where it was provided that Ruiz will buy the house and lot for the sum of P175,000.00 under the following terms and conditions:

"That I, EULALIO M. RUIZ, of legal age, Filipino, married to Iluminada M. Ruiz, with residence and postal address at 399 Gen. Luna, Caloocan City, Metro Manila, Philippines, am a tenant of MISS ZENAIDA S. SANGALANG and I agree to purchase the above mentioned parcel of land from MISS ZENAIDA S. SANGALANG for the total amount of ONE HUNDRED AND SEVENTY FIVE THOUSAND PESOS (175,000.00), Philippine Currency, to be paid as follows: SIXTY FIVE THOUSAND PESOS (P65,000.00) down payment and will assume the amount of balance of THIRTY ONE THOUSAND FIVE HUNDRED PESOS (P31,500.00) with the BANK OF THE PHILIPPINE ISLAND, Marulas Branch, Metro Manila; that after payment of said balance mortgage, a balance of seventy eight thousand five hundred pesos (P78,500.00) will be payable on or before December 31, 1983; my failure to comply with the above conditions of payment, the said property above described will be open for sale and all partial payments will be refunded by Miss Zenaida S. Sangalang". (Rollo, p. 45)

It was also stipulated that the Ruiz spouses will continue paying the monthly rental of P650.00 until the amount of P175,000.00 shall have been fully satisfied.

There is no dispute that the following payments were made by Ruiz: P65,000.00 to Sangalang as down payment and P21,119.62 to the Bank on the assumed mortgage. There is disagreement however as to the amount paid to Sangalang on the balance of P78,500.00. Sangalang maintains that she received only P33,793.00 while Ruiz insists that they paid P53,073.00.

Thus, the Ruiz spouses filed a complaint on April 24, 1984 for specific performance with damages against Zenaida Sangalang and Adolfo Cruz. (Ibid, p. 14)

In any event, the trial court found that the Ruiz spouses failed to pay in full the balance of P78,500.00 on or before December 31, 1983 as stipulated and even on the extended period of March 22, 1984. Hence, the Ruiz spouses are not entitled to their prayer for specific performance with damages. In the same breath, the trial court decided that it is only fair that Zenaida Sangalang return/refund to the Ruiz spouses the payment made by the latter. Further, it ruled that the Ruiz spouses shall continue to pay the agreed amount of rental in the amount of P650.00 until the property is surrendered to Sangalang (RTC decision, May 15, 1986, p. 7; Rollo, p. 48).: nad

More specifically, the dispositive portion of the decision reads:

"Wherefore, in view of all the foregoing, we hereby rule as follows:

"1. Ordering the plaintiffs to pay defendant Zenaida Sangalang the amount of P20,000.00 moral damages;

"2. Ordering plaintiffs to pay defendant Sangalang, attorney's fees in the amount of P15,000.00; and to pay the costs of suit; and

"3. Defendant Zenaida Sangalang is hereby ordered to return the payments made by the plaintiffs pursuant to the Agreement.

SO ORDERED". (Rollo, p. 48)

The Ruiz spouses appealed the decision to the Court of Appeals but the same was dismissed for failure to pay the docket fee. (Rollo, p. 162) On May 29, 1987, an entry of judgment was made by the Court of Appeals.

On motion of the private respondents, respondent Judge issued an order for the issuance of a writ of execution. (Ibid., p. 59)

The Clerk of Court, in his capacity as ex-oficio city sheriff, caused the execution of the 1st and 2nd paragraphs of the dispositive portion of the May 15, 1986 decision without including in the writ, the execution of the 3rd par. thereof in favor of the Ruizes. A notice of levy as well as a notice of garnishment were both issued to the petitioners. (Rollo, p. 51)

On September 2, 1987, the Ruiz spouses filed an "Ex-parte Motion for Execution of Decision Now Partly Executed," praying that a writ of execution be issued for par. 3 of the said dispositive portion and that the sheriff be ordered to make full execution of the decision by "off-setting" and/or setting-off par. 3 as against pars. 1 and 2 thereof. (Ibid, p. 92)

An order was issued by the respondent judge on September 8, 1987 the dispositive portion of which reads as follows:: nad

"WHEREFORE, in view of the fact that a writ of execution has already been issued and the same was enforced only with respect to paragraphs 1 and 2 of the dispositive portion of the decision dated May 15, 1986, let a writ of execution be issued with respect to paragraph 3 of the said dispositive portion of the decision.

"SO ORDERED" (Rollo, p. 59)

The aforequoted order was reiterated by the respondent judge in his order dated December 11, 1987 (Ibid., p. 60) after an omnibus motion was filed by the petitioners on September 8, 1987. (Ibid., p. 53)

As expected, the parties could not agree on the execution of the decision, as regards par. 3 thereof; that is the amount to be returned by Sangalang to the Ruiz spouses. Sangalang and Adolfo Cruz on May 7, 1988 moved to amend said decision of May 15, 1986 which they alleged to have clear disparities and evident ambiguities between the body of said decision and the dispositive portion.

Thus, while the trial court is fully aware that a decision once final and executory can no longer be amended or corrected, it opted, for the purpose of finally settling the claims of the parties and thereby avoid multiplicity of suits, to amend the decision in question, on July 27, 1988, the dispositive portion of which reads:

"WHEREFORE, Order is hereby issued directing:

"1. the cancellation of lis pendens annotated at the back of the title of the subject property by the Register of Deeds of Caloocan City;

"2. the plaintiffs to pay the defendant the sum of P1,500.00 monthly from May 15, 1986, the effective date of the decision up to the date they vacate door No. 2;

"3. the return of payments made by the plaintiffs to defendant Zenaida Sangalang which shall be without prejudice to off-setting of rental payments from November 1982; and

"4. the writ of possession be issued on the property, subject matter of the rescission of the contract.

"SO ORDERED" (Rollo, p. 64)

Sangalang and Cruz filed a Motion for Execution on the above-quoted order on September 1, 1988 (Ibid., p. 65) but before the day of the hearing of said motion, the Ruiz spouses filed an "Urgent Motion to Cancel Hearing of Motion." (Ibid., p. 127)

On September 15, 1988, the Ruizes filed the present petition.

In the resolution of the 2nd Division of this Court dated January 10, 1990, the petition was given due course (Rollo, p. 152-A). Petitioners' memorandum was filed on April 11, 1990 (Ibid., p. 192) while respo